GCER Featured Research Profile Series
Spouse and house? GCER Fellow Minsu Chang connects the dots between the two.
The prospects of marriage and divorce have changed dramatically over the past decades. For instance, the average marriage rate for singles between ages 25 and 64 fell by more than 30%. The average divorce rate more than doubled from the 1970s to the 1990s. Yet, during this period the rate of homeownership remained roughly constant until the recent house price boom.
In her paper entitled “A house without a ring: the role of changing marital transitions for housing decisions,” Georgetown economist and GCER fellow Minsu Chang addresses this puzzle. She provides a novel quantitative framework that shows how marital transitions are a major factor in housing decisions in the United States.
Chang’s research takes a close look at both homeownership rates and the composition of assets across individuals with different marital statuses. Her work reveals a major shift: non-elderly singles were much more likely to be homeowners, while young couples were less likely to lock their assets in housing.
Professor Chang then builds and estimates a structural life-cycle model to account for these observations. In the model, households consider the prospect of marriage and divorce when making decisions. They decide how much to consume, rent, work, and save in non-housing and housing assets. A homeowner incurs substantial transaction costs whenever he/she wants to adjust house size. This is especially important during times of marital transitions when the current house is no longer suitable after a marriage or divorce.
Chang’s mechanism complements other channels, such as borrowing constraints and labor market uncertainty, to explain the evolution of aggregate housing demand. Her analysis produces three key findings. First, comparing 1970 and 1995, 29% of the increase in homeownership by singles can be accounted for by the change in marital transitions. Second, the decrease in married individuals’ housing asset share cannot be generated without incorporating observed changes in marriage and divorce probabilities. Lastly, when extending the analysis to the mid-2000s, a period that includes the housing price boom, Chang shows that the continuing decrease in marriage contributed to a 7% increase in young singles’ homeownership rate.
Previously Featured Research Profiles:
Spring/Summer 2019 Featured Research Profile: GCER Fellow Alexandre Poirier’s and Matthew Masten’s study of treatment effects carves out the circumstances under which circumstances carve out economic behavior.
Fall 2018 Featured Research Profile: “You’re [not] fired!”–GCER Fellow Toshi Mukoyama and Sophie Osotimehin explore the dynamic linkages between employment protection regulations and firms’ innovation decisions.
Winter/Spring 2017-2018 Featured Research Profile: Child Care in Reverse: GCER Fellow Ami Ko explores the subtle effects of informal health care on the long-term care insurance market.
Fall/Winter 2016-2017 Featured Research Profile: Markets with Search and Matching Frictions: Georgetown economists James Albrecht and Susan Vroman discuss directed search in the housing market.
Fall/Winter 2015-2016 Featured Research Profile: How (not) to run a bank: Georgetown economist Martin Ravallion examines World Bank successes and failures.
Spring/Summer 2015 Featured Research Profile: Leaning in,… sort of: Georgetown economist Mary Ann Bronson explores reasons why men and women make different post-secondary educational investments.
Fall 2014 Featured Research Profile: Carbon emissions make the global economy tipsy… Harrison and Lagunoff study a “business-as-usual” scenario in a tipping model.
Spring 2014 Featured Research Profile: Collateral Damage to Standard Economic Theory… GCER Fellow Dan Cao shows how incorrect beliefs can fuel a crisis.
Fall 2013 Featured Research Profile: Oh what a tangled web we weave… Anderson and Smith explore the dilemmas of deception.
Winter/Spring 2013 Featured Research Profile: Unintended Consequences in the Struggle for Equal Rights: Anderson and Genicot explore the surprising relationship between suicides and female property rights in India.
Fall 2012 Featured Research Profile: Gale and O’Brien sing the blues over Use-or-Lose!
Spring/Summer 2012 Featured Research Profile:”What a piece of work is a man! How noble in Reason! How infinite in faculties!” … But how much is he worth? Huggett and Kaplan provide an answer.
Winter 2012 Featured Research Profile: Happiness is in the air! Levinson uses happiness surveys to put a dollar value on air quality.
Fall 2011 Featured Research Profile: Junior, the Risky Investment, Grandma, the Insurance Contract, and other bedtime stories as told by Gete and Porchia.
Spring/Summer 2011 Featured Research Profile: Ludema, Mayda, and Mishra show that when firms talk, governments listen.
Winter 2011 Featured Research Profile: Bachmann and Bai examine the effects of wealth bias in the policy process.